Crowdfunding can address the lack of access to finance which often hinders early-stage startups in Africa, while also creating a less-risky inroad for investors looking to invest on the continent, according to Elizabeth Howard, co-founder of Lelapa Fund.
The Lelapa Fund crowdfunding platform aims to help investors abroad vest directly in African startups, and enables investors to contribute their skills as well as finances to their chosen ventures.
Speaking at the 12th annual East AfricaCom event in Nairobi, Kenya, Howard said one of the main shortcomings of entrepreneurial ecosystems across Africa is a failure to facilitate access to finance.
“It’s all very well having a wonderful ecosystem, but we all know startups have a very difficult time in accessing funding,” she said.
Crowdfunding, Howard says, changes this, by allowing early-stage startups to gather funds from the international community, and as such stop being reliant on securing private seed investment.
According to Howard, crowdfunding also provides an alternative way for external investors to approach investing in Africa.
“It’s a new way for the world to see African innovation,” she said.
Howard says crowdfunding de-risks investment through the fact of co-investing; while Lelapa Fund specifically facilitates the process of investment by conducting due diligence for each startup prior to listing on the platform.
What’s more, Howard believes crowdfunding instills good governance practices in startups from an early stage, making them very investable further down the line.
From the startups’ point of view, Howard says crowdfunding offers more than just a route to finance, but provides access to technical assistance, and investors tend to act as brand champions across the world.
She also says the process enables a sharing of skills between co-investors and the startup team, as many investors are keen to contribute their skills to their investee.
“You have to create a platform which enables investors abroad and in the diaspora to contribute their skills without being overwhelming to startups,” she said.